Stocks stay near records despite Johnson & Johnson pause, inflation jump

The stock market held steady Tuesday in response to higher inflation data and top U.S. health officials calling for a  pause of Johnson & Johnson COVID-19 vaccinations.

The Dow Jones Industrial Average closed with a loss of just 0.2 percent, roughly 70 points, Tuesday after the Food and Drug Administration and Centers for Disease Control and Prevention announced they would review six cases of a “rare and severe type of blood clot” out of more than 6.8 million people in the U.S. who have received the Johnson & Johnson vaccine. All six cases were in women between the ages of 18 and 48.

Johnson & Johnson shares closed with a 1.3 percent loss on the news, which also dragged down travel and hospitality stocks that typically move in sync with developments in the fight against COVID-19.

Even so, the White House said Tuesday that the pause on the Johnson & Johnson vaccine won’t have a “significant impact” on the national vaccination effort thanks to a steady supply of the Pfizer-BioNTech and Moderna vaccines.

As the Dow fell slightly from a record high, the Nasdaq composite closed with a gain of 1 percent and the S&P 500 index closed 0.3 percent higher, setting another new record in the face of a widely expected jump in inflation.

The consumer price index (CPI), a federal measure of inflation, rose 2.6 percent in the 12 months since March 2020, the Bureau of Labor Statistics reported Tuesday, far higher than the 1.7 percent annual increase from February. The CPI also rose 0.6 percent in March, the highest monthly jump since 2012.

While sharp increases in inflation are often considered a reason for alarm, the sharp rise in prices over the past year merely reflects the recovery of the U.S. economy from the coronavirus recession.

Prices collapsed in March 2020 as the COVID-19 pandemic derailed the global economy, wiped out tens of millions of jobs, and crushed consumer demand. Economists say the 2.6 percent increase in the CPI shows prices recovering toward normal levels from their abnormally low pre-pandemic depths.

A 9.1 percent increase in gasoline prices, which fell sharply amid lockdowns, was also a primary driver of the inflation jump.

“Electricity outages in the oil patch last month and bottlenecks triggered at refining plants exacerbated the jump in prices at the pump,” wrote Diane Swonk, chief economist at Grant Thornton. She noted that the CPI minus food and energy prices, which are more volatile, rose 0.3 percent in March.

Measures of inflation are expected to rise even higher over the summer as the U.S. economy kicks into a rapid post-recession boom. Public and private sector forecasters expect the U.S. to see growth between 6 and 8 percent in 2021, pushing inflation at least temporarily higher.

Federal Reserve officials have expressed confidence that the summer spike in inflation will settle before the end of the year and not force the central bank to raise interest rates to cool off the economy. The Fed has fallen short of its 2 percent annual inflation target for more than a decade and plans to let inflation run slightly above that level to compensate for years of weak price and wage increases.

“We’d consider raising rates when the labor market recovery is essentially complete and we’re back to maximum employment and inflation is back to our 2 percent goal and is on track to move above 2 percent for some time,” Fed Chair Jerome Powell told “60 Minutes” in an interview that aired Sunday.

Updated at 4:20 p.m.